Inflation outpaces wage hikes

Salaried workers in the Philippines will likely see smaller disposable income next year as a slight increase in nominal wages will be outpaced by higher inflation, based on the research of risk management, insurance brokerage and advisory firm Willis Towers Watson.

“The 2016 salary increase in the Philippines is stable at 6 percent, similar to last year’s actual adjustment. For 2017, companies are budgeting a 6.5-percent salary increase, but we will not be surprised if we will see an actual increase of only 6 percent,” said Vangie Daquilanea, Willis Tower Watson data services leader for the Philippines, Thailand, Cambodia and Myanmar.

Based on the firm’s bi-annual 2016 Asia Pacific Salary Budget Planning Report, salaries across Asia Pacific are projected to rise by 5.9 percent in 2017, up from 5.8 percent this year. The research said this reflected a downward pressure on salary as employers keep costs down amid slowing economic growth.

The research noted that salaries across the region were seen to rise by 6.4 percent in 2016. In reality, the increase was just 5.8 percent, the first time the regional average fell below 6 percent since 2012. If that pattern continues in 2017, Willis Towers said actual increases would be well below the 5.9 percent growth forecast by companies surveyed. It will mark the third year in a row that salary increase budgets declined.

Once average inflation for Asia Pacific of 3 percent is taken into account, the projected increase in real terms for 2017 will be 2.9 percent, down from 3.5 percent in 2016.

For the Philippines, the projected rise in real terms next year is 3.5 percent, down from 4.2 percent this year.  This factored in a projected inflation rate of 1.8 percent this year, rising to 2.9 percent next year.

“While companies in the Philippines see the importance of having competitive salaries and salary increase budgets in place, they also focus now on (providing incentives) to employees with critical skills. These can be in the form of a “hot skills” allowance, retention bonuses and training programs,” Daquilanea said.

Of the 22 Asia Pacific markets covered in the report, only six are expected to see higher base salary increases in real terms in 2017: Sri Lanka, Indonesia, China, Cambodia, Hong Kong and Taiwan.

“We are seeing lower salary increase budgets across the region,” said Sambhav Rakyan, data services practice leader for Asia Pacific, at Willis Towers Watson. “Back 2012 and 2013, companies in Asia pumped a lot of money into their salary budgets and drove salaries up, but they didn’t see the revenues rise in tandem, so it made such increases unsustainable. Now these companies are being more prudent.”

The highest salary increases in 2017 will be in Pakistan (10.2 percent), Bangladesh (10 percent) and India (10 percent), although in real terms (netting out inflation), growth will be 5 percent for Pakistan, 4.2 percent for Bangladesh and 4.3 percent for India.

In East Asia and South East Asia, before inflation is factored in, Vietnam will see the highest base salary rise at 9.6 percent, followed by Indonesia (9 percent), and China (7 percent), while Japan will have the smallest (2.3 percent).

Hong Kong and Singapore are set to see overall growth of 4 percent, but Hong Kong’s inflation forecast (2.3 percent) is higher than that of Singapore (0.8 percent), so salary increases in real terms are seen to be lower in Hong Kong (1.7 percent) than Singapore (3.2 percent).